Video — How Will Your Reverse Mortgage Interest Rate Work?

How Does Reverse Mortgage Interest Work? For a reverse mortgage, you are charged interest on the proceeds you receive. This interest compounds over the life of the loan until the loan is repaid. Typically, both fixed and variable interest rates are available. Rates are tied to a standard index, such as the 1-year Treasury Bill, or the LIBOR rate, plus an additional margin, most likely an additional 1-3 percentage points. Compare interest rates carefully in considering reverse mortgage options.